Founders vs. Success vs. Home-runs

A student of mine pointed me to this article about who founds companies. It is a well-known fact (or at least lore as I have no reference at hand) that the highest success rate as a founder is with those around age 40 (38 according to the article). At that age, a founder has worked in his or her industry, knows it well, is connected, and probably has a reasonable business idea to begin with.

The article referenced above, however, wrongly suggests the next big-time entrepreneur will be one of those fourty-somethings. Maybe. But statistically, despite the high success rate, not likely. Why? Because business ideas that someone at that age typically comes up with are “reasonable” and “rational” and “rooted in reality”. Because they are based on a lot of experience. Which may well blind the entrepreneur to the more far-out ideas that, if successful, provide the home-runs that VCs are looking for.

There is nothing wrong with starting a company at age 40. It can be highly successful. Still, from an investment perspective, if the VC logic of a few home-runs that pay for all the duds and also-rans holds true, those founders are not terribly interesting. They are bread and butter, but at that age the vision as well as the circumstances to act may well be too limited to create a home-run like Facebook. So, VCs, who are looking for the next Mark Zuckerberg and for this intuitively are looking at teenagers and twenty-somethings are probably right. They just need plenty of them.

For founders, however, it makes much more sense to wait for age 40 and start a reasonable company. Which is the hard truth that VCs don’t necessarily want founders to hear. Hence all the crazy stunts of trying to lead young people to drop out of high-school or college to become cannon fodder. (As a professor, I can’t condone this, but with my Startupinformatik initiative (in German) I’m at least trying to make it a more predictable process.) A small percentage will make it, most will fail; they would be better served to have waited.